John Meriwether Genius’s Limits

We always have a dilemma to our mind that we need to be intelligent to become a wise investor. But does it a reality? Do we really require to be an immense intelligence for the decision making to investing field? We have an example of a few highly intelligent person who has intelligence but lack of the real skill which needed to become a wise investor. I am going to explain it to the current article. Isaac Newton also cannot be saved from emotional biases such as greed and fear, though he has a brilliant mind.


BM C04 01

We should understand that a higher IQ, intelligence does not protect us from the emotional biases. We need to be a master of emotional biases for earning money through investment. If we do not have mastery on our own emotion then we incur losses into the investment.


We have seen that the winner of the Nobel prize in economic of Long Term Capital Management (LTCM) also failed terrifically. They count as a genius mind during an era. During a tough time, their leverage position reaches the 100:1 which has killed the entire business.

BM C04 02

No model is perfect which can capture behavioral aspects of human. But we keep focusing on the same that our constructed model is going to capture all the madness and which make us mad. LTCM failure teaches us that we should not be overconfident to our model, we should focus on the risk management and we cannot capture the behavioral aspects of human. So that we should have control on own behavioral aspects that can help us for a longer period of time. Our intelligence should not be getting converted to the overconfidence, and if getting converted then it will definitely going to harmful for our investment career. Rather if we have a control on to our emotion then it will be going to help to our investment career though we have a little intelligence.

BM C04 03

Read for more detail: Big Mistakes: The Best Investors and Their Worst Investments by Michael Batnick


Warren Buffett’s Letter 2004

Mr.Buffett has explained why many of the investors do not able to create wealth by investing into the equities.

WB 2004 01

When we trade extensively then we incurred an additional cost which reduces our return. Also, many of us follow tips of others and rely on others which also reduces investment return. Many of people start investing when market continuously moving into upward direction with the fear of losing an opportunity to earn and get exit from the market when the market starts moving downward with the fear of losing investment. Rather we should increase our investment when the market is continuously moving downward.

Mr.Buffett has been explained that one of the ways to survive into the commodity-like business is to become a low-cost producer. Commodity business generally does not have pricing power and prices of a particular commodity are decided based on the demand & supply of a particular commodity so that they have to focus on the costs.

WB 2004 02

Warren Buffett’s Letter 2005

Investment + Cash per share at Berkshire Hathaway –

WB 2005 01

Per share value of non-insurance business –

WB 2005 02

During January – 2006, the price of a share of Berkshire Hathway – A was traded at $90,000.

Mr.Buffett’s thought on Moat

WB 2005 03

The strong moat can result in a strong flow of float. If the company having a moat then the company has the ability to raise prices, getting the float, higher return ratios, raising market shares, etc.

Indian Companies Examples

One of the two-wheelers and commercial vehicle manufacturing company of India


One of the four-wheeler manufacturing company of India


We can see that float is also getting compound over a period of time which benefits to the company to survive for the long-term and to create wealth.

Why investors are not able to make money through the company can earn well –

WB 2005 04


Warren Buffett’s Letter 2006

Warren Buffett answer for his currency derivatives position –

WB 2006 01

WB 2006 02

We need to focus on avoiding mistakes which can spoil out our wealth. If we focus on avoiding mistakes then half of the battle, we won.

Mr.Buffett on Walter Schloss

WB 2006 03

WB 2006 04

Mr.Buffett on people who clone others’ portfolio –

WB 2006 05

Mr.Walter Schloss is one of the investors who have an influence on my investment decisions. I keep his advice always with me. (Published at Safal Niveshak – )

Warren Buffett’s Letters 1957 – 2012

%d bloggers like this: